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Appellate court divided over trust liability

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The Indiana Court of Appeals split Monday in a probate suit involving whether trustees failed to distribute a portion of the trust corpus in a timely manner. The majority upheld finding the trustees liable, but ordered a re-evaluation of compensatory damages and attorney fees.

Brothers Harrison “Nick” Eiteljorg II and Jack Eiteljorg were the remainder beneficiaries of a trust their father set up effective upon his death in 1997. Their mother, Sonja, was designated sole beneficiary; she died in 2003. Nick, his stepson Roger, and accountant John Lienhart were co-trustees of the trust.

In October 2004, the parties met to discuss the distribution of trust property, which consisted of $6.5 million, including $3.2 million in liquid assets. Nick wanted he and his brother to receive $2 million total, but Lienhart disagreed because he was worried about any remaining estate tax that may be owed. Roger and Lienhart suggested distributing only $1 million total, which Nick rejected and later stormed out. The dispute led to a petition to probate court to remove Lienhart and Roger as trustees. Nick and Jack filed notice raising 13 claims of breach of trust, but Judge Charles Dieter only found they breached two duties and ordered immediate distribution of $1.5 million, which included about $300,000 in non-liquid assets, to Nick and Jack.

Judge Dieter died before he could rule on the issue of damages, so Judge Tanya Walton Pratt concluded that the relevant damages period lasted from October 2004 to October 2007 when the trust was wrapped up. She awarded Nick more than $150,000 representing lost earnings from an investment opportunity and awarded Jack more than $110,000 in lost profits from his missed real estate deal. She also awarded them more than $353,000 in attorney fees.

In In the Matter of the Trust of Harrison Eiteljorg, No. 49A02-1005-TR-485, Judges Nancy Vaidik and Michael Barnes upheld Judge Dieter’s finding that John and Roger breached their duty to administer the trust according to its terms, but they found Judge Pratt erred in her assessment of damages. They should not have been allowed to recover damages for their lost investment opportunities under Indiana Code 30-4-3-11(b)(3) because that section applies to profits lost to the trust corpus due to a trustee’s misuse, not to allow beneficiaries to recover for individual profits they would have allegedly generated on their personal shares but for the trustee’s failure to timely distribute, wrote Judge Vaidik. The issue here is more like a claim for conversion.

Nick and Jack were deprived of the $1.2 million ordered by Judge Deiter for only 9 months, so they are only entitled to interest for those months. Any assessment of compensatory damages beyond that point is erroneous, she wrote. The majority also reduced the attorney fees to $150,000 based on the record.

Judge John Baker dissented on the issue of whether Lienhart and Roger committed a breach of the trust. He noted that Nick originally rejected Lienhart and Roger’s distribution proposal. Lienhart had many years of experience as an accountant and believed that the $2 million he wanted to hold back for taxes was appropriate. When the dispute arose, Lienhart and Roger petitioned for instructions from the probate court, and once instructed, they immediately made the distributions as ordered.  

“In my view, to penalize John and Roger for doing that which we consistently direct trustees to do — and which they are statutorily entitled to do — is misguided and contrary to law,” he wrote.

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  1. Uh oh, someone is really going to get their panti ... uh, um ... I mean get upset now: http://www.theguardian.com/us-news/2015/mar/31/arkansas-passes-indiana-style-religious-freedom-bill

  2. Bryan, stop insulting the Swedes by comparing them to the American oligarchs. Otherwise your point is well taken.

  3. Sociologist of religion Peter Berger once said that the US is a “nation of Indians ruled by Swedes.” He meant an irreligious elite ruling a religious people, as that Sweden is the world’s least religious country and India the most religious. The idea is that American social elites tend to be much less religious than just about everyone else in the country. If this is true, it helps explain the controversy raking Indiana over Hollywood, San Fran, NYC, academia and downtown Indy hot coals. Nevermind logic, nevermind it is just the 1993 fed bill did, forget the Founders, abandon of historic dedication to religious liberty. The Swedes rule. You cannot argue with elitists. They have the power, they will use the power, sit down and shut up or feel the power. I know firsthand, having been dealt blows from the elite's high and mighty hands often as a mere religious plebe.

  4. I need helping gaining custody of my 5 and 1 year old from my alcoholic girlfriend. This should be an easy case for any lawyer to win... I've just never had the courage to take her that far. She has a record of public intox and other things. She has no job and no where to live othe than with me. But after 5 years of trying to help her with her bad habit, she has put our kids in danger by driving after drinking with them... She got detained yesterday and the police chief released my kids to me from the police station. I live paycheck to paycheck and Im under alot of stress dealing with this situation. Can anyone please help?

  5. The more a state tries to force people to associate, who don't like each other and simply want to lead separate lives, the more that state invalidates itself....... This conflict has shown clearly that the advocates of "tolerance" are themselves intolerant, the advocates of "diversity" intend to inflict themselves on an unwilling majority by force if necessary, until that people complies and relents and allows itself to be made homogenous with the politically correct preferences of the diversity-lobbies. Let's clearly understand, this is force versus force and democracy has nothing to do with this. Democracy is a false god in the first place, even if it is a valid ideal for politics, but it is becoming ever more just an empty slogan that just suckers a bunch of cattle into paying their taxes and volunteering for stupid wars.

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